The SEC Proposed Rule 506(c) To Permit General Solicitation

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On August 29, 2012, the Securities and Exchange Commission (the “SEC”) released its first proposed rule for the implementation of the Jumpstart Our Business Startups Act (the “JOBS Act”): “Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings.” The proposed rule seeks to implement Section 201(a) of the JOBS Act, which will allow companies to use general solicitation and advertising (collectively, “General Solicitation”) in securities offerings by using virtually any means available, including the internet, as long as sales of securities are made only to accredited investors. Often called “Accredited Crowdfunding,” the new proposed Rule 506(c) of the Securities Act of 1933 (“Rule 506(c)”) has been heralded as an opportunity for issuers to expand their network of investors by increasing the visibility of start-up companies seeking capital.

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